Governors Bend Obama's Ear Over Budget Crunch

PHILADELPHIA, Pennsylvania – Governors of more than 40 cash-strapped US states Tuesday pressed president-elect Barack Obama for a hefty helping of his planned multi-billion dollar economic kick-start plan.

Obama, in only his second trip out of Chicago since his election triumph last month, met state executives shackled by a combined forecast budget deficit of 200 billion dollars who are warning of a looming fiscal disaster.

"To solve this crisis and to ease the burden on our states, we are going to need action and were are going to need action swiftly" Obama told the governors at the talks in Independence Hall, Philadelphia, the cradle of US nationhood.

"That means passing an economic recovery plan for both Wall Street and Main Street," Obama said, vowing to jumpstart the economy, create 2.5 million jobs and give tax cuts to the struggling middle class.

"Change is not going to come from Washington alone, it will come from all of you," he said, offering the governors a "partnership."

The request for billions of tax payer dollars comes amid dire predictions that state governments mired in a credit crunch sparked by the financial crisis will be forced to make huge cuts in social services.

On Monday, California Governor Arnold Schwarzenegger warned his vast state, which would be the world's sixth largest economy were it a nation, was "headed for a fiscal disaster" without immediate action.

State governors say they are victims of the recession, the existence of which was officially confirmed on Monday, as they are hit by falling tax revenues while being overwhelmed with requests for help from citizens.

They warn they will either have to slash services like medical care for the poor and education or raise taxes, a move which they argue could slow the recovery, unless they get help from the federal government.

Obama, with vice president-elect Joseph Biden by his side, reached out to Republicans including Alaska governor and Republican vice presidential nominee Sarah Palin who accused him on the campaign trail of "palling around" with terrorists.

"I offer you the same hand of friendship, the same commitment to partnership as I do my Democratic colleagues," Obama said.

Pennsylvania Governor Ed Rendell, the chairman of the National Governors Association (NGA), said the government could channel billions of dollars from a stimulus plan into quick start infrastructure projects to boost the economy.

Rendell, who has argued that many states have been more fiscally prudent than debt-laden Wall Street firms blamed for igniting the crisis, dismissed media reports that the governors were "begging for money."

"That is definitely not why we are here," he said.

Obama and Democrats in Congress have pledged to pass a massive stimulus bill soon after he is inaugurated on January 20, to create 2.5 million jobs which some analysts estimate could cost up to 700 billion dollars.

Rendell said in Washington on Monday that governors had around 136 billion dollars worth of infrastructure projects, like road building and bridge repair, ready to go, which could immediately put people to work and boost gross domestic product.

Vermont Governor Jim Douglas said states had already made cuts to services but needed to help to save the social safety net for people plunged into economic deprivation by the recession.

"The slowing economy is resulting in growing unemployment, increased demand for state services and significant declines in state revenues," he said.

"States are not just coming to Washington with our hands out," he said.

"We're taking action at the state level to reduce our levels of spending and to live within our means."

The NGA said that 20 states had so far, just four months into fiscal 2009 cut their budgets by a combined 7.6 billion dollars.

On Monday, Schwarzenegger said in Los Angeles that his state had a current year revenue shortfall of 11.2 billion dollars and we must implement an economic stimulus package to help retain and create jobs.

On the same day, the Dow Jones Industrial Average plunged 680 points after an economic panel declared that the United States has been in recession since December 2007.

PHILADELPHIA, Pennsylvania – Governors of more than 40 cash-strapped US states Tuesday pressed president-elect Barack Obama for a hefty helping of his planned multi-billion dollar economic kick-start plan.Obama, in only his second trip out of Chicago since his election...